Double entry of resource expense

[Jason Fellon]

This scenario is extracted from a simple manufacturing process :-

1) Raw materials are dispatched to the production

Dr Cr
Stock In Hand xxxx
Work in Progress xxxx

2) Allocating resource cost

Work in Progress xxxx
Resource Expense xxxxx

Here, what type of account should be the resource expense ? Because expense accounts cannot be credited.

 

[onebadasset]

I believe your entries are backwards. Here is an example.

Dr. -- Raw Materials
Cr. ------- Cash

Dr. -- WIP
Cr. ------- Raw Materials

Dr. -- Finished Goods Inventory
Cr. ------- WIP

 

[Jason Fellon]

I believe your entries are backwards. Here is an example.

Dr. -- Raw Materials
Cr. ------- Cash

Dr. -- WIP
Cr. ------- Raw Materials

Dr. -- Finished Goods Inventory
Cr. ------- WIP

What about resource expenses and overhead ?

 

[onebadasset]

I believe I misread your original comment, as the entries you listed were just reversed in the order of what I had. All of your O/H will be rolled up into WIP.

If the expense is directly tied to the production of the good or service, it will be included in WIP, and eventually reflected in the finished inventory and COGS.